Companies worldwide expect supply-chain constraints to continue for much of 2021

From Shipping Delays and Supply Shortages to Constrain Firms All Year (Bloomberg)

Companies worldwide expect supply-chain constraints resulting from logistics backlogs and the global semiconductor shortage to continue for much of this year.

In earnings calls this week, firms including TeslaSony and shoe company Crocs expressed concerns about the ability to meet demand given ongoing supply-chain bottlenecks. Some said they don’t expect the tight supply environment to be resolved until the end of the year. […]

Tesla Chief Executive Officer Elon Musk said the first quarter presented “some of the most difficult supply-chain challenges that we have ever experienced in the life“ of the company, noting the chip shortage and production challenges in China because of Covid-19 quarantine restrictions.

Meantime, Steven Madden CEO Edward Rosenfeld said freight will be the shoe company’s most significant challenge in the coming months, with ocean rates more than doubling and air freight up close to 200%. He expects port-congestion problems to continue through at least the end of the second quarter.

From Supply Lines 4/26/21 (Bloomberg):

Ship congestion outside the busiest U.S. gateway for trade with Asia eased over the past week, with the number of container vessels waiting to enter the twin ports of Los Angeles and Long Beach staying below 20 for five straight days.

Record high output at U.S. factories

From World Factories Boom as Pandemic Recovery Accelerates (Bloomberg):

Global manufacturing and services continue to recover from the pandemic, but purchasing managers in several developed economies say businesses are still straining to meet deliveries and keep costs down amid shortages.

That’s according to a roundup of Purchasing Managers’ Index data compiled by IHS Markit. Here’s a selection of data worldwide from the latest April reports.

https://www.bloomberg.com/news/newsletters/2021-04-26/supply-chains-latest-pmis-show-world-factory-output-booming-on-recovery

Output at U.S. manufacturers and service providers reached a record high in April despite supply-chain disruptions that continue to hamper goods production. The IHS Markit flash composite index of purchasing managers at manufacturers and service providers increased to 62.2, the highest in data back to 2009, from 59.7 a month earlier. Suppliers’ delivery times for factories fell to the lowest level since the survey started in May 2007.

https://www.bloomberg.com/news/newsletters/2021-04-26/supply-chains-latest-pmis-show-world-factory-output-booming-on-recovery

Flash Manufacturing PMI is an estimate of manufacturing for a country, based on about 85% to 90% of total Purchasing Managers’ Index (PMI) survey responses each month.

Any reading of the Flash Manufacturing PMI above 50 indicates improving conditions, while readings below 50 indicate a deteriorating economic climate.

Flash manufacturing PMI is a forward-looking estimate of a country’s manufacturing sector and is intended to provide an accurate advance indication of the final PMI data.

https://www.investopedia.com/terms/f/flash-manufacturing-pmi.asp

PP prices down, PE and others up in March 2021

From PP prices down, other commodities up in a turbulent March (Plastics News):

Polypropylene was the odd resin out in March, with North American prices falling, while prices for other commodity resins in the region saw increases. […]

PP prices fell an average of 12.5 cents per pound in March. Demand for the material remained strong across many end markets. The price decline was the result of a demand drop for propylene monomer feedstock.

Prices for all grades of PE moved up 7 cents per pound in March, after increasing by that same amount in February. Prices had increased by 5 cents in both January and December, as the market was tight even before the storm hit. North American PE prices are up a net of 39 cents since January 2020.

PE and PP producers back to 70% of normal operation

From Hunt for resin continues, even as supplies improve (Plastics News):

Market sources indicated that regional operating rates for PE and PP were back to 70 percent by the end of March. PVC production also had improved, but production of PVC compounds was still being affected by limited supplies of additives, sources said.

In spite of some improvement, North American resin distributors are facing ongoing challenges in getting material to their customers.

“Polyethylene is a little better than it was two weeks ago, but polypropylene hasn’t improved much,” said Marc Fern, executive vice president at M. Holland Co. in Northbrook, Ill. “No one’s getting everything they want. It could be May or early June until supply is back in balance.”

Expect 25% to 50% higher shipping costs locked in for the year

From Higher Shipping Costs Are Here to Stay, Sparking Price Increases (SupplyChainBrain):

Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers.

The price for a container of goods from China to the U.S. West Coast and European ports has hovered near record highs for several months, and conditions are ripe for more increases even though spot rates usually soften this time of year. What’s more, new contracts being signed by some of the biggest U.S. importers indicate the spike won’t be a short-term blip.

Most large retailers and manufacturers sign annual deals with the ocean carriers to lock in their container freight rates, in private negotiations that typically take place this time each year.

Along the bellwether trade lane linking Asia with North America, contract rates in recent weeks are coming in around $2,500 to $3,000 for a 40-foot container — 25% to 50% higher than a year ago, according to George Griffiths, an editor on the global container freight-pricing team at S&P Global Platts.

“That’s showing that people are expecting this to continue, that they’re not expecting rates to come down any time soon,” Griffiths said. The container carriers “are going into this in a significant position of strength,” he said.

PP prices fall an average of 12.5 cents per pound in March

From Polypropylene resin pricing roller coaster continues its wild ride in March (Plastics News):

North American polypropylene resin prices continued an unpredictable 2021 by falling an average of 12.5 cents per pound in March, but signs point to price hikes soon.

Demand for PP resin remained strong across many end markets in March. The price decline was the result of a demand drop for propylene monomer feedstock. 

Propylene demand was down as many PP resin plants were struggling to come back from outages caused by Winter Storm Uri, which hit Texas in mid-February. Regional propylene monomer prices were down 18.5 cents per pound in March.

Polypropylene resin pricing roller coaster continues its wild ride in March

US Plastic Pact plans list of “problematic or unnecessary” packaging

From US Plastic Pact eyes major changes in packaging (Plastics News):

Meeting the ambitious goals of the new U.S. Plastics Pact will require major changes in packaging design and recycling, according to the head of the organization.

Emily Tipaldo, executive director for the pact, thinks it could, for example, require doubling the recycling rate for plastic bottles and asking hard questions about whether companies should keep using resins with poor track records around sustainability.

The pact was formed in August by consumer product brands — and major buyers of plastic — such as Coca-Cola Co., Unilever US and Clorox Co., who see it as a way to find common ground at a pre-competitive level to meet ambitious plastics goals that they have publicly set.

At its August launch, it announced some big goals for plastic packaging, all by 2025. They include a 50 percent recycling and composting rate, 30 percent recycled or bio-based content, having 100 percent of plastic packaging be reusable, recyclable or compostable, and eliminating “problematic” plastic packaging.

When you consider the gap between those goals and where plastics recycling is now in the U.S. — the overall U.S. recycling rate for plastics in containers and packaging is 13.6 percent — there’s a lot of ground to make up.

By the end of the year, the pact plans to publish its list of “problematic or unnecessary” packaging that member companies aim to phase out by 2025. Tipaldo said the list illustrates how the pact’s goals are intertwined because replacing hard-to-recycle resins with different materials or with reusable packaging will make it easier for the pact to hit its 50 percent overall recycling rate.

The group, she said, will be “thinking through what are the resins and [packaging] formats that we really need to maximize in order to achieve that 50 percent piece.”

PE up 7 cents per pound in March, a chance for normal supply by end of Q2

From A March toward higher prices for commodity resins (Plastics News):

Prices for all grades of polyethylene moved up 7 cents per pound in March, after increasing by that same amount in February. Prices had increased by 5 cents in both January and December, as the market was tight even before the storm hit. North American PE prices are up a net of 39 cents since January 2020.

PP prices had surged an astonishing 61 cents per pound since December but now are expected to decline along with propylene. Market sources said the drop could range from 6-16 cents.

“These supply challenges aren’t going away quickly,” said Bruce Flannery, commodities product director for resin distributor Amco Polymers in Orlando, Fla. “Suppliers are incentivized to come back up as soon as possible because of these high prices. And high prices haven’t driven away demand.”

He added that weather-related shutdowns essentially removed more than 2 billion pounds of North American PE and PP production and “once that’s gone, it’s gone.”

“We have a chance to get back to normal [supplies] by the end of June, but restocking the supply chain will take most of the third quarter,” Flannery said.

Warehouses empty after plastic market’s perfect storm

From Resin Squeeze Hits Plastics Makers, Hurting Autos and PPE (Bloomberg):

At the root of the problem lie a series of factors ranging from plants being shut down, the winter storm in Texas and the global shortage of shipping containers — which got thrown off their usual routes due to the pandemic. Add to that the strong economic recovery in Asia and demand for consumer goods in the U.S., and companies are at pains to secure supplies.

Derived from crude oil, base chemicals ethylene and propylene, are the building blocks of plastics.

More than 80% of packaging manufacturers face that problem, Germany’s IK sector body said earlier this month. General Manager Martin Engelmann termed the situation “dramatic.”

“It has gotten so far that the warehouses are empty and the first businesses are unfortunately forced to stop production because there’s not enough raw materials. And that’s particularly unfortunate because demand is high — not just for food but also the automobile sector or furniture,” he said.